As a small business owner, someday you’ll need to consider how you’ll handle your business for your retirement. As the following article notes, the best outcome would be for your business to provide you with some passive retirement income, but that’s not always possible.
Here are some possibilities to consider for the day you leave your business for good….
Pass It Down
Many business owners have found one of the best options for taking care of their business after retirement, and that is to pass it down to their kids.
In this scenario, you would hand over the keys and the day-to-day management of the business to your child. You would be available as a consultant if they need advice, but you wouldn’t need to be on site anymore. They would be in charge of minding the business, with all that entails.
In the meantime, you could live out your retirement dream anywhere in the world while your business is carefully tended to by your son or daughter. This is an optimal situation, because your business could serve both as an income for your child, and as a source of supplemental retirement income for you.
As an investor in the business, you would receive dividends on profits, which would give you monthly, quarterly or yearly retirement checks.
To make this dream a reality, you would need to have an attorney draw up legal papers that make you an investor in the business, rather than an owner.
Sell It and Reap the Profits
Selling is an obvious option if you just want to be rid of your business during your retirement. There are some good benefits to this choice.
One is that you no longer have to pay rent on the property, and another is that all the mandatory expenses that go along with business ownership are no longer your responsibility, including things like business insurance and liability insurance. The daily and monthly overhead administrative tasks that go along with running a business are time consuming and costly.
If you do decide to sell your business, however, you’ll be facing a large payout in the form of capital gains tax unless you put your money into an investment vehicle within a certain amount of time from the selling date.
Before you even put your business up for sale, consult with a financial planner or real estate attorney so you can be educated about your tax options and how best to use the gains toward your retirement, instead of losing a good chunk of your profits to taxes.
However you decide to handle your business after you retire, make sure you consider all the possibilities and their ramifications ahead of time.
You worked hard for years to grow your business into something special.
Now is the time to make it all pay off for you and your family. If you handle it well, you should be able to enjoy the rewards of having been a business owner before your golden years.
About the Author: Kate Supino writes about best business practices and financial strategies.